By Gary Bourgeault:
It's been a long time since uranium and Denison Mines has been in the thinking of the vast majority of investors - even commodity investors, as Japan in particular has been extremely slow to bring its reactors back on line, and...

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Denison Mines Corp. (NYSE AMEX: DNN) is a diversified intermediate uranium producer with active mines in the United States and other mines and projects on stand-by in Canada and the U.S. Denison was formed through a merger of the business operations of Denison Mines Inc. and International Uranium Corporation in 2006. Assets include an interest in two of the four licensed and operating conventional uranium mills in North America, with its 100% ownership of the White Mesa mill in Utah and its 22.5% ownership of the McClean Lake mill in Saskatchewan.

Denison's portfolio includes several world-class exploration projects that include the Wheeler River project, and several others in the Athabasca Basin in Saskatchewan. The portfolio also includes highly regarded exploration and development properties in Mongolia and, indirectly through its investments, in Australia and the U.S. Denison also owns the advanced-stage Mutanga Project in Zambia, Africa.

Uranium, Denison's primary product, is produced in the form of uranium oxide concentrates (U3O8) and sold to customers worldwide for further processing. The company also produces vanadium in the form of vanadium pentoxide (V2O5). The company is also in the business of processing uranium bearing waste materials.[1]

In 2010, Denison produced 1.4 million pounds of uranium and 2.3 million pounds of vanadium and sold 1.8 million pounds of uranium and 2.4 million pounds of vanadium at average prices of $47.67 per pound uranium and $6.33 per pound vanadium.[2]

Contents

Business Growth

Denison ended 2010 in a solid financial position, benefiting from from a C$65 million financing
during the year, a focus on continuing reduction of operating costs, and a recovering uranium market. [2] Denison has the option of ramping up uranium production, positioning it to take advantage of improving uranium market conditions.

Denison’s 2010 production totaled 1.4 million pounds of uranium oxide (U3O8) and 2.3 million pounds of vanadium blackflake (V2O5).[2] At the end of 2010 the company had 87,000 pounds U3O8 and 679,000 pounds V2O5 and 11,000 pounds FeV in inventory available for sale.[2]

During the first quarter of 2011, Denison's revenue was $26.8 million. Net loss was $7.1 million ($0.02 per share).[2]

Trends and Forces

Japanese Earthquake and Tsunami Led to Sell-off in Uranium Stocks

The 9.0 earthquake in Japan on March 11, 2011, and subsequent tsunami caused four nuclear power plants in Northern Japan to fail, leading to a radiation release and overheating in the reactors. The Japanese government struggled to prevent a nuclear meltdown. The Japanese nuclear crisis has shaken confidence in the future of nuclear energy, with Denison's stock losing more than half its value since the earthquake.

Japan has closed 11 of its 54 reactors since the earthquake. The affected reactors consume about 340,000 pounds of uranium per month. There could be a short-term impact if the Japanese reactors stay offline since there is a surplus of about 3 million pounds of uranium on the spot market.[3]

Demand for uranium outstrips supply

Every year since 1985, the world's consumption of uranium has been greater than its production.[4] To help meet this shortfall, reprocessed uranium and plutonium from the dismantling of Russian and U.S. nuclear weapons has been used.[5] The World Nuclear Association estimates that uranium mining will need to increase by almost 300% in the next two decades.[5]

There are 440 nuclear reactors operating worldwide and a total of 111 reactors under construction or planned for completion by 2020.[6] The demand for processed uranium continues to rise as countries throughout the world increase their reliance on nuclear energy for electricity.

Competition

The top uranium ten producers accounted for over 90% of the world’s primary mine supply in 2010.[2] Over 70% of the world’s production came from four countries: Kazakhstan, Canada, Australia and Namibia. Kazakhstan passed Canada in 2009 as the largest producer.[2]